NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
If you live in New Jersey, then you're lucky enough to live in one of the two states that collects both a separate state inheritance tax and state estate tax (Maryland is the other). Below you will find the current rules that apply with regard to the New Jersey inheritance tax.
Who is Exempt from the New Jersey Inheritance Tax?
Currently all charitable organizations are exempt from the New Jersey inheritance tax.
Class A beneficiaries, which include spouses, civil union partners, domestic partners, parents, grandparents, and descendants (including those legally adopted), are also exempt from the New Jersey inheritance tax.
Who is Not Exempt From the New Jersey Inheritance Tax?
Class C beneficiaries, which includes siblings, the spouse or widow(er) of a child of the decedent, and the civil union partner or surviving civil union partner of a child of the decedent, receive an exemption equal to the first $25,000 of an inheritance. Transfers that exceed $25,000 are taxed at 11%–16%.
Class D beneficiaries, which include all other beneficiaries, receive an exemption equal to only the first $500 of an inheritance. Transfers that exceed $500 are taxed at 15%–16%.
Note: In case you're wondering, Class B beneficiaries have been eliminated from the New Jersey inheritance tax laws.
Is Life Insurance Subject to the New Jersey Inheritance Tax?
Life insurance that is paid to a named beneficiary is exempt from the New Jersey inheritance tax.
When is the New Jersey Inheritance Tax Return and Any Payment Required Due?
How is a New Jersey Inheritance Tax Lien Released?
Although Class A beneficiaries are not required to file a New Jersey Inheritance Tax Return, they must file Form L-8 to secure the release of a New Jersey decedent's bank accounts, stocks, bonds and brokerage accounts.
If there was any New Jersey real estate titled in the name of the decedent, then Form L-9, or Form L-9NR for a nonresident decedent, must be filed in order to obtain a release from the state's lien on the real estate.
Where Can I Find Additional Information About the New Jersey Inheritance Tax?
For more information about the New Jersey inheritance tax, refer to the New Jersey Division of Taxation website.
For a comprehensive summary of the inheritance tax laws of the seven states that collect inheritance taxes (in addition to New Jersey - Indiana, Iowa, Kentucky, Maryland, Nebraska and Pennsylvania), refer to the State Inheritance Tax Chart.